Dutch tax proposal could boost schemes

NETHERLANDS – Dutch pension schemes could gain out of a proposal from finance minister Gerrit Zalm to scrap capital gains tax aimed at improving the competitiveness of Dutch investment institutions.

The move to scrap the tax on new issued capital was welcomed by the Dutch Fund Association, Dufas, and tax consultants. The change will apply to pension schemes if they invest in investment funds.

The Netherlands is one of few countries in Europe which puts a levy – at the moment 0.55% - on share dividends. According to the finance ministry the tax has increasingly been considered as a disadvantage to Dutch investors. Rabobank and Robeco have already moved funds to Luxembourg, and ABN Amro has recently followed their example.

“Scrapping of the levy will lead to a more equal competition”, says Dufas director Hans Janssen Daalen in the Dutch daily Het Financieele Dagblad. “The minister is showing that he is serious in creating a level playing field with other countries.”

“I expect this will end the exodus abroad of investment institutions,” says Martin Vink of PricewaterhouseCoopers. “The disappearance of capital gains tax will make the Netherlands more attractive for investors”.

At the moment the total of assets under management of Dutch investment institutions is approximately €90bn. By comparison, the value of AUM in Luxembourg, which doesn’t have company or capital gains tax, is €953bn.

Vink notes that Zalm’s announcement coincides with strategic changes at the pension funds. “Large international companies are trying to work out how their schemes in different countries can cooperate and pool assets under the new EU rules.”

According to fiscal experts the capitals gains tax is an obstacle to foreign investors as well. “In case of large transactions the levy often made investors choose for other countries”, says Roland Brandsma, professor at Amsterdam University and business university Nyenrode.

Zalm also announced the abolition of the mandatory listing for investment institutions plus a bill for more flexible shareholder requirements. At the moment funds have to pay company tax if more than a quarter of their equity is in foreign companies.